Schedule C, Self-Employed
Tax Preparation Checklist
For Schedule C tax filing, our self-employed tax preparation checklist will help you make sense of what is needed when tax time comes around.
I can tell you from first hand experience that working for yourself can offer a boatload of gratifying rewards. In fact, if you work from home like I do, there is no doubt that you enjoy your extra short morning commute to work.
A big advantage to being self employed is the variety of tax-deductible items available that can help lower your tax bill. Taking advantage of tax deductions that are available can greatly reduce the amount of taxes owed on self-employment income.
Self Employed Record-Keeping Checklist
For the self employed, the combination of self-employment taxes and income taxes can easily add up to be the biggest single expense you will face in your annual budget. Taking the time to choose a small business tax software package and keeping detailed records for your income and expenses goes a long way to simplifying the process.
Educating yourself on tax deductions that are available for self-employment is also imperative to good results. This can make a big difference in your year end tax bill, and improve a sole proprietor’s overall profitability in their self employed business practices.
Deductible Self-Employed Expenses
Generally, any purchases made specifically for your business should be deductible. Items used for both personal and business purposes should be kept track of in a journal or other method to record what percentage of the expense is used for business.
Using your Home for Business
Business use of your home allows you to deduct a percentage of the costs involved in
owning or renting your home. Determine the percentage of your home that is being used "exclusively"
for your business to determine you deduction. (Note: daycare businesses will use a formula
based on the number of hours they make the home available to the children.)
Use Form 8829 to calculate and report your home business deduction for use of your home.
Home Business Deductions May Include:
- Depreciation, based on actual purchase and remodeling costs
- Rent, if you are renting your place of residence
- Mortgage interest, real property taxes, PMI insurance
- Utilities, such as gas, electric, water, sewer, etc.
- Trash service, pest control service
- Homeowners or renters insurance
- Regular maintenance of your home
Business Use of Your Personal Vehicles
To deduct business use of your vehicle you must keep a record of your business mileage to substantiate the deduction.
Standard Mileage Deduction
The business mileage for deduction for non-home based businesses does NOT allow you to take a deduction for the mileage from your home to your principal place of business. Any other business related mileage should be deductible. The standard mileage deduction allows you to deduct the business portion for license plates, taxes, and interest the vehicle loan.
Deducting Actual Vehicle Expenses
Deductible expenses include:
- Depreciation of the purchase price for the vehicle
- Vehicle loan interest
- Auto license plate fees and taxes
- Repairs and Maintenance
Deducting Self-Employed Health Insurance
You may qualify to take a deduction for self-employed health insurance on the front of Form 1040, Line 29. Basically if you purchase your own insurance, this allows a full deduction for the cost for your health insurance premiums. You cannot take this deduction for months you were eligible to be covered by an employers' health insurance plan. See IRS Publication 502 for more details.